How do you fade an image over video in the VSE
In the Video Sequence editor press N to bring out the tool bar.
Then select the video strip you want to fade out and insert keyframes for opacity , change to a different frame, change the opacity and insert a new keyframe:



( to create a key frame hover the mouse over the opacity press the right mouse button or press I)

For other kinds of transitions/efects please refer to the Sequencer Effects Manual